COVER STORY • Digital Technology Will Create a New World After the Global Spread of Covid-19 • 4

Interview with Sean Deng, CEO of Japan onsumers’ Needs Are the Engine of Business for Producer OPPO Japan CBy Japan SPOTLIGHT

OPPO, a leading smart device brand that originated in in 2004 and has expanded to more than 40 countries, is a good representative of Asian digital business. OPPO Japan, in particular, has been stimulating Japanese consumers’ interest since its founding in 2017 with like the R11S with its highly advanced technology for taking photos, as well as the A to meet the increasing need for cashless payments among the Japanese. Sean Deng, CEO of OPPO Japan, kindly responded to our questions in the interview below. (Interviewed on March 4, 2020)

Self-Introduction whole of Southeast Asia. Then in terms of a one-stop e-commerce solution and enabler JS: First, could you please briefly arm, we have Jet Commerce which is an introduce yourself? agent for online business across various platforms targeting various groups of Deng: I myself joined in developing the consumers. Then we have OASE which is also Indonesian market for OPPO in 2011, and I an accessories arm, in terms of general was appointed the managing director of consumer products. We have seven main OPPO Indonesia when it was established in business groups in Southeast Asia currently. 2013. In Indonesia, I worked on expanding Why or how we can develop such a huge the sales channels such as major chain stores business group is because of our unique and management, and I succeeded in having corporate structure. We like to be seen as a all of the chain stores in Indonesia sell OPPO bunch of business partners who work jointly products. I became the CEO of OPPO together, seeking ventures and opportunities, Singapore in March 2014, and in order to fit as opposed to a dominant top-down huge in with the smartphone market in Singapore corporate structure. For example, a major which, like the Japanese market, has a strong Sean Deng Japanese company president in Indonesia is presence of mobile carriers, we made a very unlikely to have another business idea contract with the three biggest mobile carriers. We were able to grow and just do it while maintaining his position in his company, because our smartphone brand into the third best in Singapore in just three his company is an empire, under a parent-child company structure. years. In addition, I became the CEO of OPPO Japan in 2017, and We are more like a federation – business is constructed by common here I am. shareholders so there are no restrictions in venturing into new business. We see Southeast Asia in a situation similar to China Thoughts on Consumers 10-15 years ago. The business ideas can be duplicated to Southeast Asia. Whatever business model we choose or business venture we JS: In the light of your working experience in enter has to fulfill three criteria: the model is either tested in the Indonesia, how do you see the potential for your United States or China; the market size is humongous enough; and business in the Southeast Asian market? third, it is within our familiarized areas. People might ask, why would a company from the consumer electronics industry do cosmetics? Deng: We first entered Southeast Asia in 2013 with OPPO. Now we But if you peel off the surface, consumer electronics or cosmetics, have seven business groups in the region. In the consumer the core is actually similar, it is all about consumer business and electronics segment we have OPPO, and iMall. In terms of involves human-intensive and capital-intensive business in nature. It the other sections we have YOU which is a cosmetic brand, and J&T all involves broadly the same steps, like product structuring Express which is the number one superpower in logistics in the identification, R&D, production, sales and marketing. So, things that

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we choose usually fall into similar patterns that we are familiar with. somewhat demanding, so Japan could be used as a testing market, would you agree? JS: What do you think about Japanese consumers? Are they different from Indonesian or Chinese Deng: I don’t think that is the case because the Japanese market is consumers? just too different. The user case in Japan cannot be replicated in other parts of the world; it is the other way around. If global players Deng: Japanese consumers are very unique. Mature. I think since want to do business in Japan they have to alter everything – how the bubble era, consumers are vastly more mature than before. So they manufacture, how they do R&D, how they talk to consumers. spending on consumption has diverged either into the very high end Japan is one isolated case, and is running another standard to other or the very low end, the basic end – the necessities. So, they are parts of the world. It is not globally scalable because of its mature, logical, and rational. Secondly, I think Japanese consumers uniqueness. People always use Singapore as a test phase because value the brands and products simultaneously. They see the you have the mix of Western and Eastern and a super easy business intangible and tangible values at the same time, and expect quality of environment to enter. The market size is small, so if you lose money product. The standards are higher than the rest of the world. So in it is limited. Japan is a very expensive market for a test phase. the rest of the world, most values of a product have been seen as something easy to fulfill. It has been considered a commodity. Your JS: How do you see the future of the digital industry water boilers and their water boilers – all boil water, but the quality overall? As well as economic, the social impact could and standards are different. Just like a phone. In the rest of the be enormous. world, you can guarantee that one year of service is enough. But in Japan sometimes it is seven years. Hardware is four or five years; Deng: It depends on how it all plays out. It could affect a lot of some other consumer products like routers that emit WiFi signals people’s jobs. require seven years of maintenance. These are completely different industrial standards in terms of quality assurance. The intangible JS: Some people are concerned about rising parts are the high levels of service. You have an utterly high level for unemployment and that AI could take some human the tangible parts, and an insane level for intangible parts. The jobs. However, some people say that with greater consumers want to receive all these values at the same time. learning about technology, we won’t have to worry about unemployment. Potential & Difficulty of Japanese Market Deng: Japan is very productive in its tradeable goods – the JS: We are curious about the future trend of automobiles, the robots, the upper stream components. The digitalization in Japan. We think that digital tradeable segments are very much productive. That leads to a high technologies may not necessarily have a good wage level in the non-tradeable goods. If we were to introduce AI and “chemistry” with the national culture of Japan. Would robotics to reduce the employment rate in the non-tradeable you concur? segment, the revenue will be the same but the bottom line will be down because we use AI and robots. Then, with all the savings, it Deng: Chinese and Southeast Asian populations are more adaptive depends on the government, how they want to circulate the money and ready to accept new things, while in Japan you still have a lot of back to the people who are unemployed. With digitalization we will things being done manually or on paper. I may not be the best see a huge boost in the non-tradeable goods segments such as person to comment on digitalization, but the businesses we are in services thanks to increasing efficiency and productivity. Whether are part of the bigger ecosystem of digitalization and in this that is good or bad depends on how this country wants to harvest ecosystem our hardware and products can boost the digitalization of that increased productivity to benefit people. some functions. JS: Do you see any difficulties or impediments to JS: Japan has long been trying to attract IT ventures, doing business in Japan? but it is difficult to attract volume of FDI to Japan because of the limited potential of digitalization here. Deng: Almost all the global players when they enter Japan face an However, as you mentioned Japanese consumers are enormous amount of barriers and difficulties. Simply because Japan

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is running its own system and in order to adapt and survive in Japan support or recognition. Society in Japan is not so pro- it is a painful process to alter yourself – to reform and reshape so entrepreneurship in the way that the US or Israel is. that you are fitting the business needs. Japan is a very expensive country and consumers are paying the highest telephone bills in the JS: Why are Japanese reluctant when it comes to entire world, almost 100 times more than in India, and even entrepreneurship? Does it start with parents? compared with Western Europe, Japanese consumers are paying five to 10 times more than European consumers. Where do all these Deng: From a cultural perspective, I am not sure about the revenues go? Is it because of over-service or lack of digitalization? underlying reasons that hinder people from taking the first step. I do Digitalization can help reduce costs and improve efficiency, but how know some venture capitalists here and join their gathering do we make sure these are circulated back into society? People who sometimes, and it seems that there is a sizable group of people that lost their jobs due to digitalization could actually benefit from it. are young and energetic and starting their own businesses. Some of them already have a top line of over $100 million. Speaking of the JS: As you mentioned, the Japanese market is a little vast majority of the general public who do not take that step forward, tough. Did you need help from services like JETRO to I still need time to understand it. understand the market? JS: You are a high-tech company, and of course Deng: No. Our business philosophy is that every business in every commodities are a general trend. However, circumstance should always be able to survive on its own. So we innovation is still necessary. Do you have any always try to be self-dependent and survive rather than relying on Japanese partners in developing technologies? help from external parties. There are a lot of challenges to overcome in order to set up new business ventures. For example, due to the Deng: Yes, we have been partnering with a lot of Japanese suppliers regulatory burden, a new business in Japan needs almost three and technology powerhouses to realize our vision in further months to open a bank account, and to register a company is even developing user cases. We have very good relationships with many more insane. Japanese suppliers. There is merit in pursuing innovation with Japanese companies especially in the areas we focus on. We don’t JS: Do you think deregulation is necessary to make it think that providing consumers with excessive amounts of easier to do business in Japan? technology is actually benefiting them. We would rather identify and fulfill their needs in actual user applications and scenarios. This is Deng: Even though such policies and regulations are in place, people more important to the general public, because we are making phones manage to make it happen. From an entrepreneur’s perspective, you for everyone, not some niche segment that only wants advanced have to overcome all these regulations. It is also the merits of such a technology. Japanese technology powerhouses have been helping us difficult business environment. The merits are, for those who just to fulfill the user cases that we identify, like how to make usage of a want to test the waters or have a trial, they are less likely to come to phone more fun and enjoyable by popping up the cameras. They Japan, which makes the market cleaner for those who are dedicated really help us co-develop and co-engineer a lot of things, like evening to thriving. On one hand, business faces an enormous amount of the speed of cameras popping up has been achieved through difficulties and a huge entry barrier. But, on the other hand, business thousands of tests. You want the camera to pop up fast in the initial also enjoys a huge opportunity, so it is a fair game. stage and slow later on, so this is aesthetics. All of these nitty-gritty details could not be achieved without reliable partners like our Entrepreneurship Japanese suppliers.

JS: As an entrepreneur, you may not find the start-up JS: Have you always cooperated with large business in Japan to be so active. How do you see companies? How about SMEs or ventures in Japan? entrepreneurship in Japan? Deng: The difference between the Japan set-up and Indonesia and Deng: It is tough; the social environment is not that welcoming. Malaysia set-up is that due to heavy requirements from telecom Imagine a 25-year-old guy who drops out of a company to start his operators in Japan, the R&D has to be done partially here, which is own business – maybe he would have difficulty in getting social why we have R&D teams just outside the office. Whereas the others

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are pure commercial units. Even though we have some R&D here, it environment, understand the consumers, understand how it goes, is mainly for cracking the customization for the telecoms, not taking adapt, thrive and then make the business work. That is the basic care of the supply chain or feature identification. The procurement logic. guys, the R&D guys, will have a much clearer picture in terms of the scales, the criteria, the levels of expertise that we are looking for JS: 5G may provide you with lots of business when selecting venture partners. opportunities.

JS: Maybe consumers will finally determine the future Deng: At the country level, for the smartphone business, I don’t see of the business? the necessity to emphasize strategy; it is rather tactics. It is a battle, not a war. The war is a global scale thing, but this is a battle. In a Deng: In our business, Apple actually does not really care about the battle, people emphasize tactics only. Especially nowadays, devices business units. One same iPhone for everybody. But of course they are commodities. Other than brand value, what is the difference are in a position to set rules like that, whereas the telephone among the differenct device makers? It is the same thing. Everybody companies or B2B partners try to identify a consumer phone versus has 5G, so it is not something exclusive or proprietary. a business phone. It depends. Though you have to customize products like the military segment, for the general business JS: Do you think 5G will be a revolution for consumers segment, in terms of hardware perspective, I don’t think there has to in particular? be additional implementation of customized features. However, in the software part, yes. The software part is mainly dealing with software Deng: In the 5G area, we do see clearly identified user cases in the applications or development houses for working with the device B2B segments, while in the B2C cases people are still digging for the manufacturers with the telephone companies. You have to do actual user cases. Initially, 5G is going to benefit business segments, adaptation tests or configurations. but the benefit to consumers is not that clear yet.

JS: I wanted to ask a question about market entry. You JS: It is really thrilling to think about what kind of new made a very interesting point about using Singapore products will emerge from this 5G and future as a testing base. Is this specific to the Southeast digitalization, especially for us non-experts. I am Asian market or do you also use Singapore as a base enjoying what sort of movies will come out, to test Japan? something like The Matrix.

Deng: It’s not my idea; it is that Singapore is generally seen as a test Deng: Yes, it is truly thrilling. Maybe, in the near future, there will be base for business. People have different measurements on why it is some key 5G devices for the digital economy that will be promoted a test base for business. by public policy so Japan can keep up with the global trend.

JS: In the case of Japan do you use any other testing base or do you just use a boot-strapping strategy to test it all in Japan itself?

Deng: We just want to do it here, so no need to test, just come! The best way to learn how to swim is to dive into the ocean.

Future Business Strategy

JS: You must have some future strategy for your business. Can I ask about your plans?

Deng: In the consumer electronics segment we don’t have such a Written with the cooperation of Joel Challender, who is a translator, interpreter, fancy strategy. Our strategy is really to understand the business researcher and writer specializing in Japanese disaster preparedness.

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